Warner Bros. Discovery Reports Q1 Earnings Below Expectations
Warner Bros. Discovery (WBD) reported its first quarter earnings before the bell on Thursday, revealing disappointing results on both the top and bottom lines. The company’s revenue came in at $9.96 billion, missing Bloomberg consensus expectations of $10.27 billion. This translates to a 7% drop compared to the same quarter in 2023. Moreover, the company reported an adjusted loss per share of $0.40, compared to a loss of $0.44 in the year-earlier period.
Ad Environment Challenges and Declining TV Business
Similar to other traditional media companies, WBD has been grappling with an unfavorable ad environment. The company’s network advertising revenue tumbled by 11% in Q1 compared to the same period last year, reaching $1.99 billion. This figure fell short of Bloomberg expectations of $2.01 billion.
Additionally, the company’s linear TV business continued to decline, adding further pressure on its overall performance.
High-Profile Movie Struggles and Revenue Decline
Warner Bros. Discovery reported a decline in revenue for its studios business, even with reputable titles like “Dune 2.” The segment’s revenues dropped by 13% year-over-year, excluding foreign exchange headwinds, with only $2.82 billion generated. This came in below estimates of $3.01 billion.
Surge in Free Cash Flow Amid Aggressive Cost Cutting
Despite the challenges, the quarter had a bright spot in terms of free cash flow. Warner Bros. Discovery witnessed a significant increase in free cash flow, soaring to $390 million, surpassing Bloomberg consensus expectations of $239 million. Notably, the company reported negative free cash flow of nearly $1 billion in the year-earlier period, indicating a positive turn of events.
Strong Performance of Direct-to-Consumer Streaming Business
Warner Bros. Discovery’s direct-to-consumer (DTC) streaming business marked a notable success in the first quarter. The company added 2 million Max subscribers, surpassing Bloomberg consensus expectations of 1.25 million. This growth represents an improvement over the 1.6 million subscribers added in Q1 2023.
Upcoming Sports Streaming Partnership and International Expansion
Looking ahead, the company anticipates several positive influences in the second half of the year. This includes an upcoming sports streaming partnership with Disney (DIS) and Fox (FOXA) and the recent launch of its Max streaming service in international markets, namely Latin America and Europe.
M&A Talks and Further Cost-Cutting Plans
Warner Bros. Discovery, which has completed its two-year post-merger lockup period, is reportedly involved in merger and acquisition talks. The CEO, David Zaslav, has refrained from revealing specific details but has mentioned the importance of focusing on current assets. In the quest to drive profitability, the company is targeting additional cost-cutting measures and potential streaming price hikes.
Furthermore, the company is closely monitoring the negotiations regarding NBA media rights. Reports suggest that Warner Bros. Discovery is at risk of losing those rights to its competitor, NBCUniversal (CMCSA).
Alexandra Canal, a Senior Reporter at Yahoo Finance, contributed to this article.
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